Unplanned landed costs in Business ByDesign
Since many customers have requirements for landed costs, we would like to describe the ByDesign features, that could help to deal with that.
Use case: The company wants to consider additional costs like transportation or customs, when calculating the inventory valuation for purchased materials.
As a prerequisite set the ‘Perpetual Cost Method’ of the purchased products to ‘Moving Average’ in the material master (Valuation tab).
A: In case costs like transportation are invoiced by the same supplier in the same invoice as the procured goods, please do the following steps:
1. Manually add an item to the invoice. Just enter a description like ‘Transportation’. It is not necessary to specify a quantity or a price. A net amount is sufficient.
2. Mark the checkbox ‘Distribute Additional Costs Proportionally’ in the ‘Cost Distribution’ tab of that item.
3. Post the document.
4. Execute the GR/GI Clearing Run.
B: Now in case a separate invoice for transportation costs is sent by the same supplier or another business party (freight forwarder or others), do the following steps:
1. Create a supplier invoice with an item. Again, a description like”transportation” and a net amount is sufficient.
2. Click on ‘View All’ and change the item ‘Type’ to ‘Additional Cost Debit Item’.
3. In the ‘Cost Distribution’ tab click on ‘Distribute among other invoices or credit memos’. In the respective pop-up enter a purchase order id or a customer invoice id and click on ‘Distribute’. This adds referenced invoice items that should be corrected (in the sense of adding additional charges). The result of this distribution is displayed in the table on bottom of the cost distribution tab.
4. Post the document.
5. Execute a GR/IR Clearing Run.
Please also check out my blog on how to manage credit memos for unplanned landed costs – have a look here.
Thank you for your explanation of this functionality Stefan!
This is interesting stuff - we are implementing ByDesign now and landed costs are under a lot of discussion. We would follow process B in 95% of cases where invoices are received from freight forwarders for carriage in charges.
Can I ask, will your process above add any costs to the items in inventory? Ideally for us, the cost of items in inventory should be the full landed costs so items are comparable. We bring in items (factored & purchased) under different shipping terms so without this the costs are not consistent. Under FOB (free on board) we would pay carriage costs from overseas port to our UK premises. Under CIF (cost insurance and freight) we only pay carriage charges from UK port to our UK premises. You can see how these are very different! We would also want to use landed costs to drive cost of sales so we get a better idea of our margin.
I know we could use standard costing but I don't want to lose the functionality of the moving average which is clearly more suitable for our variances in material price.
If you have any thoughts on this or you know someone who has done this before I would appreciate the chance to discuss it.
following the steps described in my blog the landed costs finally should also update the inventory costs. You have to use moving average as a method and you also need to execute the GR/GI clearing run. Only then the landed costs will be added to the inventory valuation costs.
This is potentially very good news - I can see how this process will work beautifully for capturing a proportion of landed costs.
The business I work for can turn stock very quickly and some parts we import and book into inventory can go straight back out again as sales. It has been known for goods to arrive and depart again on the same day although this is unusual being that we generally sell from stock. Further to that, our logistics and duty invoices can have a 2/3 week lag from date of receipt of goods. In some scenarios I imagine inventory will have been bought and sold on (in part or in full) before we are able to capture the landed costs and add them to it. I guess in these cases your process would not work for us?
What is your view on handling "planned" landed costs - is there an alternative way you think we could tackle this in ByDesign? We are talking to our implementation partner in the UK to see what they can come up with but I am interested to know what people have done to overcome this issue assuming - I can't imagine we are the first company to raise this!
If you think it may be easier to talk more directly please e-mail me at email@example.com
thanks for your offer to have a more detailed conversation on this. I will contact you as proposed.
this option B, step 2 is not available for the function "New Customs Duty Invoice".
Are you recommending not to use the function "New Customs Duty Invoice" if we want to add the customs costs to our inventory?
have you tried to maintain the purchase order item reference instead in the item of the customs duty invoice?
We have tried this option, and in cost distribution the reference to the purchase order seems correct.
However after executing GR/IR clearing, the customs duty invoice amount is not distributed to the inventory cost...
Do you know how we can fix this?
As on date, the deductible tax from ‘Customs duty invoice’ will go to tax accounts and the non-deducted tax from ‘Customs duty invoice’ shall go to expense. There is no provision to distribute to inventory.
It’s how its designed to work all along. Please also have a look at the following KBAs:
Ok. Thank you!
Thank you very much for very informative blog.
I am working on receiving the imported free-of-charge goods where we would like to allocate the customs duty cost to this particular item.
What I did was
1. Create PO with an item AMT = 0 & Invoice Expected Option = Unchecked.
2. We post supplier invoice for the other items in PO created in 1. Of course, we cannot have that line item in the invoice as the Invoice Expected Option is unchecked.
Now that we have another invoice which is the customs duty for that PO item, we would like to allocate this inventory cost to this particular material.
Please help suggest what we can to achieve this. Otherwise, this cost will go to overhead cost.
Note that: if the free-of-charge goods is the same material with other line items in PO, the cost could be weighted to those line items. Here, we have free-of-charge material which is not the same as other line items in the PO.
how did you resolve this issue in your system? I am currently facing the same issue and I would like to find a solution.
Is there a way to account for the landed cost (freight, duty etc.) for stock transfer order (STO) where we are using "Moving Average" costing method.
Product A cost $X at site 1 (Ship-from).
$y in incurred for freight etc.
Product A cost at site 2 (ship-to) would be $X+y
thank you for nice blog. I am also wondering, how to split landed costs when the material was partially consumed (for example 50% of material). In such case I would like to post 50% to stock and increase inventory and 50% to material consumption. Is this somehow possible?
Thank you for answer in advance.
using moving average it is not possible to reassign those differences to material consumption. We therefore recommend to have a look at the actual costing feature, that was introduced in 2016 in SAP Business ByDesign. With that the assignment is possible. Please be aware, that actual costing uses a period approach, meaning that average costs per period are calculated.
I have an other probléme ,according to your method I can distribute the costs proportionally to the amount, in our case we want to distribute by quantity, Is this somehow possible?
I am not aware of any method to distribute by quantity.
could you pls. point out in more detail how SAP ByD could handle landed cost´s for inventory no longer in stock/already shipped. In this situtation Distribute Additional Costs Proportionally is no longer an option. Recording late invoices as COGS/Cost of period does n0t meet legal requirements. Which process/WoC/view will improve the situation. Any specific system docu. available.
Thanks in advance,
I don't think that using that approach with moving average will solve the problem that you have addressed. However, I am not a FIN expert, so there might be other ways I am not aware of. What I could think of is using the actual costing approach instead. This will collect and assign all the period costs to the purchased and produced materials, and this that COGS should also be updated properly. Maybe you can have a look at actual costing instead.
Thank you for the quick reply. I will investigate the the mentioned feature.
Have a good one,
I'm struggling to de-activate the 'Distribute Additional Costs Proportionally' . The checkbox seems grey-out.
In short I recieve 1 line of invoice freight, and I need to set manually the % across multiple lines in the invoice corresponding to the receipt of the materials
any trick, or a sequence to respect?
I also have the same issue right now , Did you find any solution for this ??
Hi Christian, Amin,
May be, am a bit too late to reply here. This check box is greyed out, as you might have potentially changed the item type (under basic data) from invoice item to something else. Please check.
Hi V Krishna
Thanks for your comment
Changing the item type under basic data tab will not be useful because as you can see we use the type "Additional cost debit item" to allocate cost on another item
So changing types will not help
Is there any other way to allocate costs non-proportionally ??
This is very useful and nicely explained.
In case HS code (Harmonized Commodity Description and Coding Systems) applied and if there any tax amount to be absorbed to the inventory how to cater the requirement in ByD?
can you provide us with more information on what use case you refer to and what countries are involved?
With regard to the imports in Sri Lanka we are using HS codes to capture the import taxes.
The taxes should be treated as follow in below example.
HS Code : 04031000
General Duty : 25% of the cost or Rs 200/= per Kg should be absorbed to the inventory cost.
VAT : 12% of the cost is a recoverable tax which should record as a recoverable amount.
PAL : 05% of the cost is a un-recoverable tax amount which should be absorbed to the inventory cost.
NBT : 02% of the cost is a un-recoverable tax amount which should be absorbed to the inventory cost.
Cess : 30% of the cost or Rs 300/= per Kg should be absorbed to the inventory cost.
Please advise whether this can be handled in ByD?
the deductibility of a tax determines, if it is added to the inventory value.
Example. If a tax is fully deductible, then the tax amount would not add up to the inventory value.
If taxes are nondeductible, they would be added.
Partially deductible taxes should also be handled accordingly.
We have a first customer in Slovakia where we need to do the same with Customs Duty Invoice.
However, cost distribution details CDI is only for Purchase orders. Is there also way how to allocate cost from Custom duty Invoice to those items?
Thanks! Regards, Filip
currently, customs duty invoice items do not allow a cost distribution like additional cost debit items. This would be a new requirement. I would ask you to create a influence request so that we can see how many customers would require this feature.